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Wolfpack Research's Dan David on what Biden's presidency means for the market

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Dan David, Wolfpack Research Founder, joined Yahoo Finance Live to discuss his outlook for the markets under Biden.

Video Transcript

SEANA SMITH: We want to bring in Dan David-- he's of Wolfpack Research-- to help us break down some of the gains that we're seeing today. And Dan, when you're looking at another day of record highs-- the S&P on track to close at a new record, Dow on track to close at a new record, the NASDAQ the massive outperformer today-- what do you make of the momentum that we're seeing in the market on the day that Joe Biden is getting inaugurated?

DAN DAVID: Well, first of all, thanks for having me back, Seana. And congratulations to President Biden and Vice President Harris and the administration. I think we're all obligated, at least here on day one, to wish them well and much success.

I think what this says is, people are thinking a lot of liquidity is going to hit the market again-- $1.9 trillion more coming to the market. Where are you going to put your money? It's probably not going in a bank account that gets you no interest. It's probably not going into real estate that are high taxes, high fees, high transactions. It's going to go in the market. And I think that's what the market's telling us, and I think they're right.

ZACK GUZMAN: Yeah. I mean, when we think about some of the issues that President Biden is going to be facing, a lot of the same issues we saw President Trump grapple with even before the pandemic-- you know, facing these pressures from China, of course, the failed trade deal. When we think about what Biden's going to do here in taking a different tact, it was interesting to see China come out and slap sanctions on members of the Trump administration, including Mike Pompeo.

Talk to me about maybe what's going to be different under a Biden administration, what investors, perhaps, should be expecting on how this is going to go.

DAN DAVID: Well, we have a unique opportunity here to not look too far back and see how the Obama-Biden administration dealt with China versus how Trump dealt with them. And if you look at it, President Obama and Vice President-- then-- Biden were the consummate statesmen. They were very professional, like many other administrations prior to them. But quite frankly, that didn't get them anywhere. And as a matter of fact, that lost traction for us

If saying please and thank you were a good foreign policy in negotiating with China, the Obama administration would have been very successful. But we weren't. I'm not saying that the Trump administration was wildly successful in dealing with China, but they did show us another tact, that a bit more forcefulness and consequences-- timelines and consequences. And I hope President Biden takes that tact with his professionalism, statesmanlike attitude, and brings us forward-- bringing in allies as well. We need our allies to join us in this fight.

SEANA SMITH: So, Dan, when you take a look at how investors should be positioned right now, what are you favoring, at this point, as we have a new incoming administration? Obviously, some policy changes will be enacted, similar to the ones that you were talking about when it comes to foreign policy. But we also have the possibility of higher taxes. That, of course, could add implications for the market. Where you seeing opportunity?

DAN DAVID: Well, you know, I'm generally a short seller. I'm actually a short seller. And we do active short-selling research. So if you're asking about opportunity where a raise in taxes are concerned, you're looking at companies with a lot of levered debt. A lot of companies would take this debt, low-interest rates, buy back stock, enrich themselves through options.

Well, now they're heavily levered. And if you raise taxes by 20% or 30%, this is going to be a big problem for some of these companies. And we already have a list of them-- not to mention, you know, the companies that we generally go after committing fraud, whether it be in China or here in the United States. That's still pretty pervasive in the markets today, too.

ZACK GUZMAN: Yeah, and aside from, you know, some of those issues here, when we talk about general, or specific, investor stories when it comes to specific companies and fraud issues, there's also kind of the froth that we're seeing play out in the market writ large. No doubt been very busy in terms of the IPOs that we've already seen here in 2021.

DAN DAVID: And SPACs.

ZACK GUZMAN: But appreciate you coming on here. And SPACs, another issue there.

- Yeah, there you go.

- Dan David, Wolfpack Research founder, joining us today. I appreciate you coming on.